债券市场分析与策略第7版答案4.docxVIP

PAGE PAGE 92 Copyright ? 2010 Pearson Education, Inc. Publishing as Prentice Hall. CHAPTER 4 BOND PRICE VOLATILITY CHAPTER SUMMARY To use effective bond portfolio strategies, it is necessary to understand the price volatility of bonds resulting from changes in interest rates. The purpose of this chapter is to explain the price volatility characteristics of a bond and to present several measures to quantify price volatility. REVIEW OF THE PRICE-YIELD RELATIONSHIP FOR OPTION-FREE BONDS An increase (decrease) in the required yield decreases (increases) the present value of its expected cash flows and therefore decreases (increases) the bond’s price. This relationship is not linear. The shape of the price-yield relationship for any option-free bond is referred to as a convex relationship. PRICE VOLATILITY CHARACTERISTICS OF OPTION-FREE BONDS There are four properties concerning the price volatility of an option-free bond. (i) Although the prices of all option-free bonds move in the opposite direction from the change in yield required, the percentage price change is not the same for all bonds. (ii) For very small changes in the yield required, the percentage price change for a given bond is roughly the same, whether the yield required increases or decreases. (iii) For large changes in the required yield, the percentage price change is not the same for an increase in the required yield as it is for a decrease in the required yield. (iv) For a given large change in basis points, the percentage price increase is greater than the percentage price decrease. An explanation for these four properties of bond price volatility lies in the convex shape of the price-yield relationship. Characteristics of a Bond that Affect its Price Volatility There are two characteristics of an option-free bond that determine its price volatility: coupon and term to maturity. First, for a given term to maturity and initial yield, the price volatility of a bond is greater, the lower the coupon r